August 6, 2008
Severstal Seals Deal on $1.25 Billion Esmark Purchase
By Joe Napsha, The Pittsburgh Tribune-Review
Aug. 6--The consolidation of the global steel industry continued Tuesday as Russian steelmaker OAO Severstal completed its $1.25 billion purchase of Esmark Inc., the parent company of Wheeling-Pittsburgh Steel Corp.
Severstal sealed the deal to acquire Esmark by purchasing 38.7 million shares of Esmark, or about 94.1 percent of its outstanding stock, by Monday's deadline for the tender offer, Severstal said. The Russian company paid about $775 million in cash for Esmark and its subsidiary, Wheeling-Pittsburgh Steel, plus it assumed Esmark's debt.
"We are now poised to become a leading producer and supplier of domestically-produced steel to a region that has a consistent demand for high quality products," said Gregory Mason, Severstal's chief operating officer. Esmark has considerable growth potential, Mason said, and Severstal has promised to invest about $250 million in the Esmark and Wheeling-Pittsburgh Steel operations.
By acquiring Esmark, a steel distributor in Chicago, it picked up a group of steel service centers in the Midwest. Wheeling-Pittsburgh Steel operates steelmaking, finishing and coke plants in West Virginia and Ohio, and has an idled mill in Allenport, Washington County.
The deal will give Wheeling-Pittsburgh an infusion of capital for needed improvements to make it more competitive, said steel industry analyst Charles Bradford.
Esmark's sale leaves up in the air its plans to move some employees of Esmark and Wheeling-Pittsburgh from their bases in Chicago and Wheeling, W.Va., to an office in Marshall in northern Allegheny County. That move was planned for this summer, but Severstal, with North American headquarters in Dearborn, Mich., is assessing its needs, Severstal spokesman Michael Henson said yesterday.
Had India-based Essar Steel Holdings Ltd. won the bidding war for Esmark. the headquarters for Essar's North American operations would have been moved from New York City to Pittsburgh, according to Madhu Vuppuluri, president of Essar-Americas. Severstal, however, outbid Essar in June.
The fate of the Allenport mill also has not been determined, as the company will conduct a review of all Esmark's plants, Henson said.
Esmark closed the mill in June, laying off 240 workers, because it was not cost-effective to ship steel made in the Ohio Valley to the Allenport plant for processing into cold rolled sheet steel, then ship it back to Ohio.
William Kinney, president of United Steelworkers Local 1187, which represents workers from the Allenport plant, could not be reached for comment.
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